Investment Updates
Now's A Time To Recall Financial Planning Basics
Published Friday, December 5, 2008 at: 7:00 AM EST
Just a few years ago, almost everyone knew at least one person who had made a fortune in the stock market. But then many investors lost a small fortune. For those who are wondering what went wrong, here's a refresher course in financial planning basics.
Diversification. In the late 1990’s, many investors thought diversification meant buying three computer stocks and two Internet stocks. Others assumed they were being prudent because they owned a dozen mutual funds. But true diversification means buying a range of investments in markets that do not move in lockstep with each other. Through most of the 1990s, growth stocks were the spectacular performers; in recent years value stocks have been successful. A balanced portfolio will have both. It will also include bonds. But just starting out with the right mix isn’t enough; you also need to rebalance your portfolio regularly, trimming positions that have done well and adding to others that may be poised to rebound.
Planning. Establishing clear life goals and a long-term strategy is the essence of sound financial planning. A solid plan lays out the amount you must save annually, assuming an expected average rate of return, to reach your financial targets. It prepares you for future expenses, such as a child’s college education, and unexpected setbacks, such as premature death or disability.
© 2024 Advisor Products Inc. All Rights Reserved.
More articles
- Tax Pros And Cons Of Municipal Bonds
- 412(i) Plan Is Complex But A Boon In Some Situations
- Ever Think About Investing In A Vineyard?
- Is The 4% Solution Right For Your Retirement Plan?
- Succession Planning For Solo Businesses
- Understanding The Myths Surrounding Your Estate
- Leave A Legacy To Future Generations-On Video
- How Can Wealthy Parents Avoid Spoiling Their Kids?
- Preparing For A Takeover Of Your Family Business
- Stocks Closed At A Record High
- Federal Reserve Projects Strong Growth
- The Best People Were Wrong
- This Week’s Investment News In Six Charts
- U.S. Investor Picture Of The Week
- The Conference Board Backs Off Its Recession Forecast